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08/12/10

NEW YORK (TheStreet) -- With consumer giants (JNJ ) and c(PG_) both offering
nuggets of news that wasn't all pleasing in their latest quarterly reports, some are questioning
whether the long-touted benefits of owning these stocks still apply in today's challenging
consumer environment.

Year-to-date, P&G stock is down 0.6% and J&J stock is down more than 9%.

For the fourth quarter, Procter & Gamble reported earnings below the consensus estimate. P&G
tallied earnings of 71 cents a share vs. the average analyst estimate of 73 cents and year-ago
earnings of 80 cents. Net earnings were $2.19 billion compared with $2.47 billion in the same
quarter last year.

P&G's fourth-quarter net sales increased 5% to $18.9 billion, as organic sales grew 4%.

P&G now anticipates that fiscal 2011 net sales will rise 2% to 4%, and organic sales will increase
4% to 6%. Diluted net earnings from continuing operations and core earnings are anticipated to
be in the range of $3.91 to $4.01 a share, up 11% to 14% and up 7% to 9% respectively.

Looking back at P&G's fourth quarter =
 contributor and Trinity Asset Management
portfolio manager Brian Gilmartin commented in a recent column on =
  that though the
company maintains robust cash flow and free cash-flow generation and recently increased its
dividend, "the story currently seems to be heavy investment in marketing and advertising along
with pricing pressure to gain and sustain market share, both in developed and emerging
markets."

Gilmartin said although the majority, or 60%, of the company's businesses experienced market
share gains, "it came at a steep price."

Currently much of the analyst "angst" about P&G has to do with the company's ability to
"appropriately and accurately price its brands for both growth and margin sustainability," given
that its longer-term growth will be driven by the faster-growing emerging markets vs. the U.S. and
other larger free markets," Gilmartin wrote.


As for J&J, Morgan Stanley recently downgraded the stock to equal-weight from overweight on
lower pharmaceutical growth and fewer leverage opportunities. Johnson & Johnson has lowered
its full-year earnings guidance to $4.65 to $4.75 a share from $4.80 to $4.90 a share -- after
reporting second-quarter earnings that beat expectations -- to reflect its massive over-the-
counter drug recalls this year, the suspension of its McNeil Consumer Healthcare manufacturing
facility in Fort Washington, Pa., and unfavorable changes in foreign currency exchange rates.

Analysts were anticipating full-year earnings of $4.81 on revenue of $63.24 billion.

For the second quarter, J&J reported net earnings of $3.4 billion and earnings per share of $1.21,
representing increases of 5.4% and 5.2%, respectively, as compared with the same period last
year. These figures excluded an after-tax gain of $67 million representing the net impact of
litigation matters. 

The company reported sales of $15.3 billion, an increase of 0.6% compared with the same
period last year. During the quarter, Worldwide Consumer sales fell 5.4%, Worldwide
Pharmaceutical sales increased 1% and Worldwide Medical Devices and Diagnostics sales rose
4.1%.

Analysts on average had been expecting earnings of $1.21 on revenue of $15.64 billion.

During the quarter, J&J received clearance from the U.S. Food and Drug Administration to
market narafilcon B, the first and only silicone hydrogel daily disposable contact lens in the U.S.
Also, in July, the company entered into a definitive agreement to acquire Micrus Endovascular, a
global developer and manufacturer of minimally invasive devices to address hemorrhagic and
ischemic stroke.

In light of all this, readers of @  , in your opinion are J&J and P&G still desirable stocks to
own in the current consumer climate? Take our poll below, to see what @   has to say.

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